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Big Data Talent Gap is a serious problem. Recognizing
it, Universities are introducing courses on Analytics and Big Data. This has
resulted in a larger supply of people who are well versed with data
manipulation, handling and running codes. But, it has created a gap of another
type. In an article on “Three Problems All Data Scientists Experience”, Drew
Farris of Booz Allen Hamilton Inc. writes that “…problems go beyond technology
and machine learning and are broadly encountered regardless of the task at
hand: interpreting the problem, sourcing the data, and describing the
outcomes”.

A lot of new joiners in analytics teams across
companies face a serious problem especially while describing the outcomes. They
fail to understand what their effort will lead to? This effort could be the
software code they are working on or the project module that is assigned to
them. Why only new joiners? Even employees with 6 to 7 years of experience find
it difficult to look at the big picture. The institutes where they learn these
analytics’ techniques are partially to be blamed. They are taught to play with
the software. It could be coding or working on the dime a dozen graphic user
interfaces that are available. They understand how to handle data, get the
results and interpret the data. How this interpretation would lead to business
gains or efficiency gains is not clear to them!

A simple example could be a segmentation exercise
where the collected data is used to segment customers into various groups.
These groups could be divided demographically or by using the customers’
choices and preferences. Once this segmentation is done, each segment can be
profiled both on the basis of demographics and choices. Up to this point, all
analytics greenhorns would do a perfect job. The next step is where
complications arise. When they present this to the client, the client enquires
about the usage of this exercise. They do not have an answer to this. If they
can tell the client how each segment can be uniquely targeted using specific
marketing campaigns and what amount of efficiency gains they would achieve, the
client would be delighted. If this is done correctly, apart from the short term
gain of client appreciation, they can expect long term career growth
opportunities.

With so much of data available through various
sources like smartphones, internet and social media sites, the requirement for
experienced analytics professionals is bound to grow. The beauty of the
situation is that this data availability is only going to increase with the
advent of internet of things. In internet of things, devices will talk to each
other with an app on your smartphone helping you to switch on your television
and air conditioning just before you enter your home. A stage will come when
the data of your home arrival times can be analyzed and the app will trigger
the switching on of your devices
automatically without you even tapping it.

We also keep hearing of big data silos across data
stores within the same organization. This happens because people with skills in
data analytics do not understand which problem can be solved using the unified
data. If they can be exposed to such problems and solutions, a lot of data can
be unearthed from data warehouses and used productively.

There is an urgent need for institutions teaching
analytics courses to equip their students with the ability to look at the
larger business problem and then use their data skills to solve that. Instead
of starting with the data, they should start with the business problem and
while working on it they should not miss the woods for the trees. This can be
done easily when the focus is on the business problem and not on the data.

The Wholesale Price Index for May 2015 stood at minus
2.36 per cent, continuing its downward trend since the last seven months. The
Consumer Price Index stood at 5.01 per cent, well within the range of 2-6 per
cent targeted by the Reserve Bank of India. With the release of these figures
on June 15, 2015, the demand for a further rate cut have resurfaced.

The industry associations like Confederation of
Indian Industries and FICCI have already issued statements to the effect that
Reserve Bank of India should continue the “rate easing cycle” to “support
demand”.

Repo Rate

Earlier this month, on June 2, the Reserve Bank had
cut the Repo rate by 0.25 per cent, third time this year. Repo rate (short for
‘Repurchase Agreement Rate’) is the rate at which the central bank lends money
to commercial banks.

When banks experience a shortage of funds, they may
borrow money from the RBI. When the RBI increases the repo rate, it becomes
more expensive for banks to borrow money, creating a ripple effect that affects
businesses and individuals.

Higher the interest rates to acquire loans, lower the
profits yielded, which may result in spending cuts and a slowdown in the
overall growth of companies.

Similarly, an increase in repo rate results in banks
increasing their interest rates charged for consumer loans as well, thus
reducing the purchasing power of individuals. The diminished ability for
consumers to spend discretionary money results in reduced demand for goods and
services and affects businesses as well.

Stock Markets

Stock prices are a function of business operations
and expectations people have viz. companies at different points in time. If a
company is seen cutting back on spending or making less profit, the
expectations of people from that company may go down, resulting in a lower
demand for the shares of that company. With decreased demand for the shares of
a particular company, the share prices start to fall.

When a macroeconomic factor, such changes to the repo
rate, affects the entire market, the indices (like Nifty or Sensex) would go up
or down, representing the impact on the market as a whole.

Therefore, when the repo rate is cut, the general
effect is an increase in the amount of money in circulation, which makes the
stock market a more attractive area of investment.

(However, it is important to note that repo rates are
not the only determinant of stock prices and market trends. It must also be
noted that the stock markets represent only the organised (listed) sector of
the economy. And the indices only represent some of the largest companies
listed on the stock exchanges).

Market
Reaction

Usually,
as in January 15 this year, a repo rate cut should create a positive effect in
the stock market.

On June
2, the RBI governor cut the repo rate by 25 basis points to 7.25 per cent.
Raghuram Rajan announced, "Banks have started passing through some of the
past rate cuts into their lending rates, headline inflation has evolved along
the projected path, the impact of unseasonal rains has been moderate so far,
administered price increases remain muted, and the timing of normalisation of
US monetary policy seems to have been pushed back. With low domestic capacity
utilisation, still mixed indicators of recovery, and subdued investment and
credit growth, there is a case for a cut in the policy rate today."

The
markets had been expecting a rate cut and had started to factor its positive
impacts in the stock prices even before June 2. See figure 1 below.

The market had moved up by 1.37% on May 29th, 2015 and
remained flat on June 1st, in anticipation of a rate cut. However,
in spite of the rate cut on June 2nd, the NIFTY fell by 2.36% and
continued its downward trend for the next five trading days.

Why did this
happen?

This happened because of the cautious stance of the RBI. The fall
in stock prices was because the investors had already expected the third repo
rate cut this year and had factored it in, anticipating, in fact, a 50 basis
points repo rate cut.

The uncertainty with regards to monsoons which may result in food
inflation if not managed properly by the government, rising crude prices amidst
considerable volatility and geopolitical risks, and volatility in the external
environment, were cited as the reasons for a 25 basis point rate cut rather
than a 50 basis point rate cut.

Therefore, overall guidance from RBI was not that of a ‘cheer
leader’.

Rate cut
again

RBI’s various statements and interactions with the media indicate
that further rate cuts in the near future is unlikely. However, with inflation
figures expected to be well within RBI’s target, there may be room for further
rate cut. Though, RBI would be watching the monsoon and crude oil prices like a
hawk before any decision is taken!